Moving on up

The U.S. dollar is worth nearly 90 centimes d'euro this morning. That's 90 eurocents or nine-tenths of a euro. Just a few years ago, the USD was worth as little as little as 65 eurocents for a while. Today's exchange rate represents an increase of 25 eurocents per dollar compared to the dollar's low point. In American terms, it's as if every time you change a dollar ($) into a euro (€) now, the bank throws in an extra quarter.

As a result, for every $1,000 a retired American living in France gets in retirement income from U.S. sources, she or he gets approximately 900 € instead of 650 €. That's 250 euros more. Say, hypothetically, that you have $3,000 a month in retirement income from U.S. sources. Now you have 750 € per month more than you had just a few years ago. You can afford to travel more, have more meals in restaurants, or buy a needed new refrigerator or washing machine.

When the euro replaced the French franc (FF) in early 2002, one dollar was worth not 90 eurocents, but about 1.14 €. The U.S. was still prospering as it did under Bill Clinton's administration, and the dollar hadn't yet suffered the George W. Bush downturn. By the time we bought our house in France in the spring of 2003, the dollar was down to 92 eurocents. The dollar declined steadily for years, and after going as low as 65 eurocents finally stabilized at between 70 and 75 eurocents in recent years.

If you have dollars, this would be a good time to pay for a vacation in the Eurozone countries (France, Italy, Spain, Belgium, Holland, or Ireland, for example). For us who live in France, the lower euro means that our airline tickets for travel to the U.S. are less expensive too. My annual trip is coming up, and I need to get a plane ticket soon. The airlines, including the American ones, require me to pay for the ticket in euros, because my principal residence in in France. If the ticket costs about 750 euros as it did last year, that will be more like $900 rather than $1000 or more.

The smart thing for Walt and me to do would be to put some of the dollar/euro windfall away, of course, and save it for a rainy day. Who knows how long the U.S. dollar will continue to fly so high? The reality, though, is that we need to buy a car, and we may soon need replacements for our old refrigerator and the washing machine. I've been waiting for the dollar to strengthen before buying a car, hoping the old Peugeot wouldn't give up the ghost in the meantime. Maybe the moment has come.

P.S. If you are used to thinking of the value of the euro in terms of the U.S. dollar — as most of us do, I guess — let me say that the euro's high point against the U.S. dollar was very close to $1.60. Over the past two or three years, it has stayed between $1.30 to $1.35. Now it's down to $1.12.